Euro Starts Q3 on a Weak Note

The euro entered the third quarter of 2026 at $1.14, close to a one-year low and following a 2% drop against the USD in June. Investors are closely watching the ECB’s Sintra Forum and inflation updates from Europe’s major economies, while the dollar remains supported by expectations that the US Federal Reserve will raise interest rates this year. All eyes are on today’s panel featuring ECB President Christine Lagarde and new Fed Chair Kevin Warsh, as markets look for clues on economic assessments and future policy directions. Meanwhile, recent inflation data across Europe pointed to easing price pressures, providing some relief to ECB policymakers. Investors are also awaiting updates from the US-Iran peace talks in Qatar, with hopes for a lasting ceasefire agreement, though direct talks between the two sides are not anticipated.

The euro closed June at around $1.14, close to its one-year low, as investors turned their attention to the ECB’s Sintra Forum and inflation updates from Europe’s major economies. The highlight is Wednesday’s panel with ECB President Christine Lagarde as markets seek clues on economic assessments and policy directions. Inflation data indicated easing price pressures in Germany, France and Italy in June, while Spain’s rates stayed near two-year highs. The euro is on track for a monthly loss of over 2% against the US dollar and a 1.3% quarterly decline, with investors expecting the US Federal Reserve to raise interest rates this year to curb inflation amid a robust labor market. Meanwhile, the US-Iran ceasefire, which reopened the Strait of Hormuz, has lowered oil prices and inflation expectations, leading markets to scale back bets on rate hikes by the ECB and Bank of England.

The euro climbed back above $1.14, rebounding from one-year lows hit last week, as investors are now focusing on the ECB’s Sintra Forum and upcoming inflation data from Europe’s major economies. ECB President Christine Lagarde will open the forum on Monday, with the most anticipated panel on Wednesday, featuring Lagarde, new Fed Chair Kevin Warsh, and Bank of England Governor Andrew Bailey. Markets will watch for signals on their economic assessments and policy outlook. Since the interim US-Iran ceasefire reopened the Strait of Hormuz, oil and inflation expectations have fallen, prompting markets to reduce bets on interest rate hikes by the ECB and Bank of England. On the data front, Spain’s EU-harmonized consumer price index rose 3.6% year-over-year in June, unchanged from May and holding at its highest level since June 2024.